VN is better prepared to bounce back from COVID-19 impacts, EuroCham Vice Chairman says

Could you tell us the current situation of European FDI enterprises in Viet Nam (compare before and after the impact of the Covid pandemic)?

Until the COVID-19 pandemic hit, European companies were positive about the trade and investment environment in Viet Nam and optimistic about their future prospects in this market. Our Business Climate Index – a regular barometer of the sentiment of our members – was returning near-record highs as a result of Viet Nam’s open, competitive and attractive business environment.

Of course, the global COVID-19 pandemic has had an inevitable impact on European enterprises in Viet Nam, as it has in countries around the world. Over 90 per cent of our members have been negatively affected by this virus and, as a result, our BCI score fell to its lowest-ever level last quarter. In detail: around 50 per cent of our members were “significantly” negatively affected, and a further 40 per cent “moderately” negatively affected. 

However, this is emphatically not a reflection of Viet Nam’s business environment; merely a reflection of wider global trends and the impact of a global pandemic on enterprises around the world. Viet Nam has been one of the international success stories of this crisis, and should be seen as a model for other countries to follow.

European businesses in Viet Nam have been impacted in a number of ways. Over half (54%) have seen a moderate increase in their costs in the last quarter, with a further quarter (24%) seeing a significant increase in costs. The biggest impact on our members has been a fewer customers/orders (67%) followed by a loss of revenue (61%) and interruptions to the supply chain (40%). Despite this, three-quarters of enterprises were still operating at more than half their capacity last quarter.  Meanwhile, 4 out of 5 business leaders expect to retain at least 70 per cent of their workforce. 

Viet Nam has a dual goal of fighting against the pandemic and recovering the economy, with policies on tax exemption and reduction, deferral of tax payment, suspension of social insurance contributions, financial support packages, etc. How do you evaluate this? Do you see the effectiveness of these actions by the Government of Viet Nam? 

There is no doubt that, because of the swift and decisive actions of the Government, Viet Nam is better prepared to bounce back from the impact of COVID-19 than many other countries. The Prime Minister has targeted GDP growth of 5 per cent in 2020, and while this is a drop compared to previous years, it is still much higher than many other countries in the region and around the world. 

Through a combination of effective public health measures and economic support, Viet Nam has ensured that normal business operations are now able to resume while other parts of the world remain in lockdown. Even during the period of social isolation, the government was proactive in reaching out to chambers of commerce such as EuroCham to find solutions that would help companies maintain their operations where it was safe to do so.

EuroCham members have welcomed the Government’s measures, such as those introduced in Directive 11, to support businesses during the pandemic. In our most recent Business Climate Index, a deferral of tax and land rent was the most popular step, with a suspension of social insurance contributions coming a close second. These measures have meant that, despite huge and enduring challenges to a range of sectors and industries, Viet Nam has been able to weather the storm and emerge in a strong position to recover.

In terms of foreign investment, Viet Nam's swift and successful reaction to the pandemic – which has been applauded around the world – has reaffirmed that this is one of the safest and most attractive places in which to do business for international investors. Indeed, Viet Nam is now opening up again, after tough but effective social isolation measures. This means that companies are now better able to return to normal, profitable business operations compared to elsewhere in the world where restrictions to business operations are still in place. This is a positive sign that Viet Nam is open for business, and will help to accelerate trends of foreign investment seen in recent times. 

At the recent conference between Prime Minister and businesses, Chairman of EuroCham emphasized: “It is essential that Vietnam not only protects domestic businesses, but also supports foreign companies. So, what is the expectation from foreign businesses in the coming time, specifically European businesses?

Last weekend EuroCham was proud to speak at an event with the Prime Minister in Ha Noi which brought together the government and foreign business communities to discuss the challenges and opportunities of economic recovery after COVID-19.  For a country so integrated into global supply chains and capital flows, it is essential that Vietnam protects not only its domestic enterprises but also supports the foreign companies who will be crucial to the country’s economic growth – particularly exports – once the international community has the disease under control and once global trade returns to normality.

The impacts of COVID-19 on international trade and investment remain unpredictable and it is possible that more action could be required in the future. In our most recent BCI, we asked European business leaders what other measures would be most helpful for their enterprises, and around three-quarters said a deferral of other taxes such as CIT, PIT, VAT and SCT would be the most welcome support for their companies. 

What are your recommendations to the Government of Viet Nam to quickly restore economic development and continue to maintain and create a new breakthrough in bilateral economic relations between Viet Nam and the EU?

Despite Vietnam’s success in fighting COVID-19, it is clear that the world will be living with the impacts of the virus for some time to come. Viet Nam is better-positioned than most to recover, for the reasons mentioned earlier.

Once this agreement is implemented, Viet Nam will have privileged access to Europe’s high-income consumer market of around 500 million people, while European investors will have better access to Viet Nam's fast-growing economy. This will help to boost trade and investment activities as tariffs and barriers to trade begin to be phased out. In doing so, the EVFTA will help both sides to boost their economic recoveries while also building new and stronger economic relations between Viet Nam and the European Union./.

By Minh Ngoc